Moderate growth but still tough times ahead + What is ahead for the SEQ market + Areas set to boom – why and when

The reasons why Brisbane can’t match the growth happening in Sydney and Melbourne

The properties that should held for a long time and the ones that should not be

The areas that are set to boom and why

What you can ask an agent to guarantee that will test their ability

Some commentators could be calling the top of the market too soon

What the next decade holds in store for the South East Queensland market

The best people to talk to so you get the best advice

Why you should be looking to invest on the Gold Coast

An agents ability to manage the stress in the selling process should be a KPI

Why the market is likely to get tougher

Transcripts:

Why agent commissions are falling – Martin Grunstein

Kevin: Well, without doubt, there would be few industries in the world that have suffered the erosion of margin suffered by the real estate industry. Agent commissions have fallen from around 3% 15 years ago to around 2% today. That’s according to Martin Grunstein, who is one of the world’s best experts on customer service. He joins me to talk about this.

G’day, Martin. How are you doing?

Martin: I’m well, Kevin. Nice to talk to you.

Kevin: Why is that so? Why have they fallen so much?

Martin: It’s been a commoditization of the industry by the agents. It’s not unique to real estate; it’s happened in a lot of other industries. The car industry, which used to produce millionaires in the 1970s and 1980s has almost no profit in it today. I was at one car conferences and they said dealer profitability nationally is 0.5%. They only make money on finance and aftermarket.

What has happened is a commoditization. Just like the car industry, when all the advertisers will get the cheapest price and then whatever. Holden is competitive. It used to be Ford. Now, it’s another Holden dealer offering the same car at a cheaper price. And a lot of that has happened in the real estate industry.

Kevin: Just on that point about car dealers, there’s a great listening here for real estate agents too I think. But with car dealers, they were quite happy – talking to some of them several years ago – to not have much of a margin on the sale and know that they could pick it up on the service. But do you think where the problem lies is they took their focus off what should have been the main source of income?

Martin: Yes, absolutely. Where is the law that says you can’t make a profit on a $40,000 car and they have to make it out of service and finance? Goodness me. Why can’t they make it out of service, finance, and the car? The reason is if you look at advertising in the car industry, all you see, they all echo “We’ll never be undersold. You find any price and we’ll match it.” What they’ve done is they’ve taken all the margin out of their own industry.

I believe that’s happening in the real estate industry as well – maybe not so much on a formalized basis, but you are having agents out there virtually matching price with other agents to get the listing, and it’s almost become the norm that these guys will negotiate their fee. It’s hard to have sympathy for the agents who have commoditized their own industry.

Kevin: We’ve actually put a blog article that you wrote, Martin. It’s actually on both of our websites, Real Estate Uncut and Real Estate Talk. It’s a really interesting read. You make a point in there. Let’s talk about real estate now and forget about the car industry just for a moment. The point of stress: if you ask a seller, what do they find difficult about the transaction, it’s actually the amount of stress.

Do you think I just do enough to earn their fee to help overcome that stress management?

Martin: Look, the very top ones do but the overwhelming majority don’t. When I’m doing customer service workshops in the industry, I get people to tell stories of crappy customer service. I hear a lot about real estate. But the one that upsets them most is just like a communication during the sales process. It is a very stressful experience for a lot of vendors in that area.

What they complain about is unreturned phone calls, unreturned e-mails, and people not communicating them and giving them peace mind when they’re going through something very stressful. And that’s the same today as it was 30 years ago.

Kevin: It’s interesting, isn’t it, because I’ve heard agents and we’ve trained agents to talk about getting top fee by saying “I’m a good negotiator. If I can’t negotiate my own fee, how can I negotiate it for you?” Does that resonate with sellers?

Martin: I tell you, it is laughed at.Look. I don’t think the consumer believes the lies any more. The stuff that used to be the clichéd stuff years ago, “I’ll get the best price for your property” well, these days, everyone has the market what your property is worth not some real estate agent. Also, “We’ve got [3:58 inaudible] buyers and we’ve got a unique marketing program.” If there was unique marketing program, it would be used by everybody. These are myths.

And this “I’m an expert negotiator,” that’s a classic one. When I’m at conferences, you talk to these real estate agents and they say “I’m an expert negotiator,” and if you say, “Will you reduce your fee?” “Certainly.” This is the rubbish that is going on.

What the consumer wants, what the vendor wants is take the stress out of this.

Kevin: Okay. How can an agent do that?

Martin: Firstly, by not making promises they can’t keep and not talking a lot of rhetoric. One example I’ve used when I was doing stuff – it must have been maybe 15 years ago – with Elders in Western Australia. We had about 16 offices, and we found out the number one thing people hated was unreturned phone calls.

What we got the agents to say was “Look, anyone can sell your property. It’s a great property. The difference is how much stress you want to go to in the process. If I fail to return your phone calls during the sales period, if I fail to return your phone calls within three business hours, please deduct $200 from my fees every time I let you down. You keep score. Because if anything goes wrong during this or I’m not communicating with you or I don’t turn up on time to a meeting, I should suffer for that not you the customer.”

Now back then, they were getting 3% or whatever – 3% plus. Say for example, the Elders guys had a guy from Hooker saying “I’ll do it for 2.5%,” what we trained the Elders guys to say was “Go back to the guy from Hooker and ask him to give you $200 back if he doesn’t return your phone calls, which he won’t.” Then we got them to say “Why would you believe anything else he says?”

I got a letter a year later saying their earnings went up25% in a flat market selling peace of mind and credibility to a low-credibility marketplace. I think that’s just as powerful today as it was 15 years ago.

Kevin: What’s the harm in a consumer asking whether an agent would actually do that?

Martin: Well, I don’t think it should be an initiative coming from the consumer. The agent is the one who’s selling his or her services, and they should be giving the reasons to list with them. I believe stress management is just as important a reason in who gets the listing as marketing and all these other things that the agents talk about there.

In fact, for the consumer, it’s the only one they can relate to in terms of how you make me feel, how efficient are you, do you keep your promises, all of those sorts of things. I want to know that you keep your promises. The trouble is even the agents who don’t keep their promises still promise. So, until I eventually give you the listing, I don’t know whether you’re good or not.

Kevin: Very thought-provoking. Always great talking to you, Martin Grunstein. You make a lot of sense. You can go to Martin’s website, MartinGrunstein.com.au. Go and have a look at the blog on our website, and all his details are in there.

Martin, great talking to you, mate. We’ll catch you again soon.

Martin: All the best to the team. Thanks, mate.

Why regional areas are becoming more attractive – John Lindeman

Kevin: I’m pleased to welcome to the show a man who I’ve followed for many, many years, who speaks all around Australia as somewhat of an authority on what’s happening with the property market, John Lindeman from 7steps2success.com.au. We’ll tell you more about that site a little bit later.

John, welcome to the show. Thank you very much for your time.

John: It’s a pleasure, Kevin, and welcome, everybody.

Kevin: John, I want to talk to you specifically about what’s happening with regional markets around Australia compared to the capital city markets. We know that Sydney and Melbourne now are largely becoming very unaffordable and very hard to buy in.

Is that actually promoting some opportunities more so in some of those regional areas, John?

John: It is. I think regional markets are very much underrated. In Australia, we have some huge regional markets, like the Gold Coast, which has over 600,000 people. The Sunshine Coast nearly 300,000, and Newcastle has about 430,000 people.

These are huge markets and they do have a lot of potential, but the problem with them is that because of the general population drift that we’ve seen to capital cities – as migrants come to Australia, they like to live in the big capital cities – that you have to have a specific reason why you want to invest in a regional area, and that is that there’s going to be higher growth than you would otherwise expect because in general, capital cities outperform regional areas, so you have to find these sorts of areas where demand is rising.

In the case of Sydney and Melbourne, as you said, they’ve become very unaffordable. The first thing I’ve noticed is that a lot of buyers are being pushed into regional markets outside Sydney and Melbourne. It’s what we call a ripple effect.

And that’s already taken place in Sydney. Prices have moved up in Wollongong, the Central Coast, and Newcastle, and they’re starting to go up further north and south of Sydney. The same thing in Melbourne, where you find that growth is now occurring in the Mornington Peninsula, Geelong, and it’s extending into Ballarat and Bendigo.

Kevin: I guess one of the dangers of looking at some of these regional markets is that if you go into a market that is really dominated by one or two industries, it becomes quite difficult to understand where the future lies for some of those regional areas, John.

John: These are all very large metropolitan areas. They’re not capital cities, but nevertheless they are bigger than centers and there are a lot of different dynamics occurring in these markets. The main thing, of course, is the fact that they’re more affordable and so people – and investors as well – tend to move into these markets because they’re cheaper.

Kevin: What are some of the triggers you look for if you are looking around at one of the regional markets to decide where you should be investing? What do you look for, John?

John: I look for something that’s changing, in other words, that’s going to change the nature of demand in the market. That can usually be in, say, mining towns and ports where you have a boom in construction. It might be a port expansion or a new mine opening, but it can also be things like infrastructure such as roads and railways. Really, what we’re seeing at the moment is some major infrastructure projects that are occurring and going to occur around Australia, and I think they will have massive effects on housing markets where they’re located.

Kevin: What do you see as some of the dangers, John? What should you be aware of?

John: I think the danger with these infrastructure development projects, especially the transport ones, is that they may not actually occur. I think a good example of that is the Inland Rail Project, which was mentioned in the recent Budget.

This has been on the drawing boards for about 20 years, but now the government has brought forward plans for its construction – a high-performance freight rail corridor between Melbourne and Brisbane, which will also connect South East Queensland by rail with Adelaide and Perth.

This is going to have massive flow-on benefits for local industries and regional communities. It’ll create thousands of jobs, and it’s going to dramatically affect housing markets along the route. The risk is, of course, that it hasn’t yet got underway and governments have a way of delaying or changing these projects after the announcements are made.

If it goes ahead as planned, you could probably see massive increases in rent demand for towns along the way, the major towns such as Parkes,Narrabri, and Maury, near Brisbane. Oakey is another center where there’s going to be massive work done. And that will lead to median house price rises as well. These are all very affordable areas right now, but you have to be sure that the construction is actually going to go ahead as planned.

Kevin: For anyone looking to invest in these regional markets, if they were to come to you for advice, John, would you suggest that they need to travel to these areas, and if so, at what stage in their discovery should they be going there – in the very early stages or once they’ve done their sums?

John: I think in the construction stage, it’s very much looking at rental demand – if that’s rising – like in the towns I’ve just mentioned. If you can see that the number of rental vacancies has fallen dramatically because of construction work that’s being undertaken, then that’s the first sign that growth is likely to occur.

But in other areas and in other projects – and another good example is the Gold Coast Light Rail; that’s going to profoundly affect housing markets all the way down through the Gold Coast to the New South Wales border – the best way to ascertain the likely effects of that is to go and have a look.

If you live in Brisbane, take a trip down, look at the construction, how it’s proceeding, talk to real estate agents about the likely demand it’s having on housing, especially tourism and retiree markets. Doing a bit of on-the-ground research, I think, is well worthwhile in these sorts of projects.

Kevin: John, I know that you’re always looking around and always looking at what’s happening with the markets. If I were to ask you to give me your top three regional markets around Australia, would you be able to do that?

John: I think the main area in Australia that has huge growth potential is northern New South Wales, and that’s largely because of highway duplication,which is only three years away from completion. That’s having a profound effect already on rent demand in the major towns along the way, such as Ballina, Lismore, Grafton, and Coffs Harbour.

These towns – according to us in our research – are going to see massive price rises occur once that highway is completed. I think they’re the best areas in the whole of Australia that you can look for for investment over the next few years.

Kevin: Always good talking to you, John.

John Linderman’s website again is 7steps2success.com.au. You’ll find out where John is speaking. You can also communicate directly with him and get a lot of great tips from that site as well.

John, thank you very much for your time.

John: Thank you, Kevin. It’s been a pleasure, and I wish everyone the best of luck with their investment journey.

Why Brisbane will not grow like Sydney and Melbourne – Brett Warren

Kevin: We’ve spoken quite often on the show in the past about how there is no one property market; there are different property markets all around Australia. Could be highlighted, I guess, when you consider just how much growth has been in Sydney and Melbourne, and then you have a look at the Brisbane market, which in itself has had steady growth but nowhere near to the volumes that we’ve seen in Sydney and Melbourne. So, why is that? Why hasn’t Brisbane bloomed like Sydney and Melbourne?

I want to ask this question because I’ve read a very interesting blog article written by Brett Warren, who is the Senior Property Strategist at Metropole in Brisbane. He joins me, and I guess if anyone’s going to have a feeling about how to answer that question, it’ll have to be you, Brett.

How are you? And welcome to the show.

Brett: Good. Thanks, Kevin. Thanks very much, good to be here.

Kevin: Mate,I know you’re a property investor yourself, and this is probably a question you’ve asked yourself as well, but how would you answer it to me? As an investor, I’m asking you, why hasn’t the Brisbane market grown like Sydney and Melbourne?

Brett: Yes, it’s a really good question, and obviously something that I’ve looked into myself. After the GFC in 2008, which everyone had, Brisbane didn’t have as much luck. As you know, in 2011, we had the floods, and from that point on, our mining boom has really hurt Brisbane’s confidence. There are a few other things as well that I looked into, too.

Kevin: The numbers:I know we can always come back and look at the numbers and that’s all very historic, but has that helped you understand the situation? Tell us what you found out.

Brett: Absolutely. Yes, like many property investors, I’m an analytical type of person, so I always turn to the numbers. What I’ve actually done in this case, Kevin, is gone back to the last time Brisbane was in a period of excessive growth in 2008, just before the GFC, and the numbers are considerably different to where we are now.

Our population growth has been slashed by more than a half. Overseas migration is down by about 70%. As you know, our unemployment rate has increased by about 2%, so there are about 62,000 more people out of work. And during that period of time, our wage growth has come back from about 4.2% per annum to only be about 2% per annum now.

Kevin: What are the most important measures there? You’ve given us population growth, interstate migration, overseas migration, labor, unemployment. Are there any in there that are key indicators for you?

Brett: Population growth, absolutely. With higher population growth, you get more demand for housing in terms of buying, but also renting.

In 2008, you probably remember reading the headlines that we had almost a thousand people a week moving to Queensland from interstate. That’s down by almost two-thirds, and more importantly, overseas migration is down by about 70%. They’re real key factors, especially when we’re talking about pushing the price of housing up and things like that.

Kevin: There’s a blog article that Brett has written that we’ve published on our website. Go and check it out for yourself – a lot more detail about that. But I want to get to the end of this conversation, the bottom line for you.

Is there light at the end of the tunnel? Have you been able to find that maybe the market has turned around a bit?

Brett: Yes, absolutely. I just ran some more numbers in 2016 as opposed to 2015, and the numbers are starting to turn around. Our population growth has started to head north again. We’re getting more people moving from overseas and also interstate, and our unemployment rate has come down. The number of people actually getting employment is decreasing as well, which is what we want. We want more people in work, we want more people coming into Brisbane and driving those property prices upwards.

Kevin: Let’s have a look at the next decade. Is there anything you’ve learned from the figures? And I know you can’t give us any undertaking about what’s going to happen over the next ten years, but what have you learned from looking at these figures, and how do you feel about what’s going to happen in the next decade?

Brett: I’m actually quite optimistic, Kevin. On the blog there, I’ve put down what the Queensland median house price has actually been since 1981, and every ten years. It hasn’t been as consistent with other states, and I can track back to 1991 where it was $113,000. And by the end of 2001, ten years later, it had only managed to go up to $166,000.

So, there wasn’t that consistent ten-year doubling effect, and the next decade actually almost tripled. That’s what we can kind of draw parallels between what may potentially happen in the next decade. So, it may not get to that extent, but I’m really optimistic about the next decade in Brisbane, especially if those numbers continue to perform as they are in the last year or two.

Kevin: Good on you, Brett. Good talking to you, mate. And it’s a great article. You can check it out at our website, just go to RealEstate.com.au. Just go into my own featured channel and you’ll find it in there. It’s a blog article written by Brett Warren, who is Senior Property Strategist at Metropole in Brisbane.

Kevin: Well, we’re hearing it now quite often that the property market has topped. Well, that’s what some experts are saying. Initially, some analysts at investment bank UBS called the top of the housing market just a few weeks ago, suggesting both market activity and price growth will now moderate.

CoreLogic joined in on that, and they made some comments that it may just be too early to make that sort of a call. However, they did say there is a note for some caution. Well, is it a time to worry? Let’s find out. Michael Yardney from Metropole Property Strategists joins me.

Michael, you’ve no doubt read these reports. What’s your take on that?

Michael: One month’s statistics is a bit too soon to call the top, but Kevin, if we’re honest, we’ve really had an amazing couple of years in the real estate markets. It’s been a dream run for many investors, particularly those who’ve lived in Melbourne, Sydney, and to a lesser extent, Brisbane.

Money’s been cheap, the banks have been falling each other to lend you money, and as long as you bought at a reasonable location, that rising tide lifted all ships. But we are changing now. The conditions that drove those dramatic price rises over the last couple of years, they seem to be fading away currently, Kevin.

Kevin: The question for you, Michael, is where are headed?

Michael: Some commentators are suggesting that now with lower auction clearance rates and slower investor finance, that we’ve hit the top of the market. Now, sure, auction clearance rates have dropped a bit in the two big cities, Melbourne and Sydney, but they’re still in the 70% range, not the 80% range, and I don’t think you need to worry about it until it gets to maybe around the low 60% range.

I think what’s really happening is that we’re in for a period of more moderate price growth for the rest of the year, followed by a period of stagnation where prices are going to slow down, stop, and in some areas, drop a bit.

But Kevin, the sky isn’t falling and we’re not doomed, and property prices are not going to crash.

Kevin: Michael, what’s going to drive the property markets now?

Michael: On the macro level, it’s going to continue to be things like our economy, interest rates, availability of credit, consumer confidence, the world economic events, what the government is going to do if it fiddles with policies, and those external influences like political influences that make us either feel confident or not, and then digging down deeper at the local level where we live, it’s going to be related to our economic growth, our jobs, population growth, and of course, the old fashioned supply and demand always is going to be a big factor.

Kevin: How big a player will finance be in this whole scenario, Michael?

Michael: Kevin,I’ve been investing for over 40 years, and every property cycle I’ve invested through has eventually come to an end because of finance. In the old days, it used to be called a credit squeeze. Kevin, you’re old enough to remember when the government induced those credit squeezes and the banks just weren’t lending anyone any money. Then after deregulation, the Reserve Bank did it in a different way. What it did was hike interest rates, and every time it did that, it put an end to the cycle.

This time around, Kevin, we’re back to a credit squeeze. I’m surprised no one else has called it that. Maybe they’re not as old as me and remember that term, but ASIC has created those macro-prudential controls, so even though interest rates are low, they’re tightening the screws on certain people – on investors.

Kevin: I’m just wondering, Michael, if this is such a bad thing, because the Sydney and Melbourne markets, that growth seem to me to be almost unsustainable.

Michael: You’re right, Kevin. I much prefer having a credit squeeze in a low-ish interest rate environment, in other words, where the average person isn’t going to default on their mortgage, where businesses are not going to go bust, and it’s just going to slow the market more steadily than that blunt hammer of a very high interest rate environment that affects everybody. So you’re right, it’s actually not a bad thing at all.

Michael: I think ahead, we’re going to have a period of subdued economic growth. Our economy is doing okay, but it’s not going to boom along. I think jobs growth is going to remain fragmented, with most of the permanent new job growth happening in Victoria and New South Wales. We’re in for a period of lower inflation, so the culmination of all those things means we’re very likely to be in for a period of lower interest rates.

Consumer confidence is going to be fickle. When people are uncertain, they’re going to tend to stop spending, and we have local issues that are concerning us and overseas issues. I think finance is probably going to get a little bit tighter before it gets looser. Our population growth is slowing, and I think another factor that’s going to slow down these markets so that we’re going to head into a period of more moderate growth is less foreign investment.

Only recently, I’ve read that last year, there were 40,000 requests for the Foreign Investment Review Board for people from overseas buying Australian properties. This year, the forecast is for 15,000, less than half the number of foreign investors this year. That’s going to affect certain segments – those new and off-the-plan properties.

Kevin: So the bottom line, Michael, is that we’re in for a bit of moderate growth?

Michael: Yes. Like it or not, we’ve moved on to the next phase of the property cycle; you’re right. But obviously, there’s still going to be some overperformers and some underperformers, so you have to find the sort of property where the demographics, the people are still going to be able to afford to pay, where they’re going to have good jobs, where they’re going to have rising wages, and this is likely to occur in the middle ring suburbs of our big capital cities, Kevin.

Kevin: An interesting insight there, Michael. Thank you so much for joining us today on the show. I appreciate your time.

Michael: My pleasure, Kevin.

What many investors overlook in a buy and hold strategy – Cate Bakos

Kevin: A common question we’re asked is “Is this a good market to be buying a property, renovating it, and flipping it over, or should we be looking at buy and hold?” There are different strategies, different timings, and different markets. Cate Bakos, a buyer’s agent out of Melbourne has a particular bent on this.

Hi, Cate. How are you doing?

Cate: I’m great, Kevin. How are you?

Kevin: Good. Maybe “a particular bent” is not the best way to say it, but correction versus no correction, is this a time to buy and hold?

Cate: I think all the time is the time to buy and hold. That is my philosophy. It’s served me well as an investor, and it’s what I adopt with my clients.

I think trying to pick a cycle in the market is a really tricky thing, and I also think that property as an asset class is a very difficult one to make serious money out of in a short term. When you’re flipping, you have things associated with the selling costs that can make it quite difficult to make some money even when you’ve had a good gain and you’ve created some value. So, it’s not a favorite approach of mine at all.

Kevin: The market is very cyclical, and in fact, just recently, I spoke to the author of a book about creating wealth through property in any market condition. He made the point that property can be very forgiving, provided you hold on to it and it’s a long-term play. Would you agree with that?

Cate: I couldn’t agree more. I think that’s a really good point. I’ve seen properties that have been selected for a long-term hold and they might not have been the most perfect property at the time. I can certainly speak for myself in my early years. Before I was a buyer’s advocate, I was buying property, and I held them.

I look at some of those properties now and they weren’t the best properties I could have bought at the time. I’d probably focused on areas I was familiar with orwent for properties that I felt would perform for various reasons. But property is forgiving. They’ve still performed. They’ve done well. It’s a really good point to make.

Kevin: In looking at the buy-and-hold strategy, are there any things that you find investors need to factor in or that they possibly could overlook?

Cate: Absolutely. I think the most important thing for buy and hold is provisioning for your holding costs and making sure that you understand the cash flows, so you know what the property’s rental value is. That might be different to the rent that it’s currently getting. You have to look at “What is the reasonable and long-term rental I can anticipate on this asset?” You need to make sure that that isn’t likely to change, so you’re not going into an area that has a really strong demand for tenants now for a short-term reason.

You also need to consider some of the ongoing maintenance items and provision for them. You can’t anticipate that a property will just swan along and not create any out-of-pocket implications for you with maintenance items, whether it be just regular repainting and gardening and all the rest of it or whether it’s items like hot water services and upgrades to appliances.

Lastly, I think people who are feeling nervous about interest rates and where they are and if they’re in a position where a rate increase could really hurt them, they need to think about fixed rates as well.

So, there are some things that people can do to mitigate the bumps in the journey.

Kevin: What sort of planning goes into when you’re sitting down with someone? What is long-term for you? Is it three years, five years, ten years, or is it a lifetime?

Cate: For me, it’s a lifetime. I like the idea of having the debt retired eventually and the property is an asset that’s held in your estate and it’s creating some passive income through rent. But for some people, long term might be 20 years.

I think anything less than 10 years, certainly anything less than a typical market cycle – which we all have a rule-of-thumb estimate for it being seven years; that’s a very hard discussion now because our cycles have not been all that predictable. But I think anything less than 10 years is not long term at all.

Kevin: Let’s have a look now at reviewing your portfolio. Obviously you’re not advocating that you would keep necessarily a bad performing one. And let’s face it, Cate, from time to time we do make mistakes. We put something into our portfolio that’s not going to perform.

How often do you review, and obviously what do you do with a dud property?

Cate: It’s a good question. I review all the time. I never really take the finger off the pulse. If it’s a dud property, if you’ve made a bad selection, and you’ve worked out the cost of letting go of it – there might be losses associated there – if you can do something better with that money and if getting rid of the property enhances your own lifestyle and your sense of happiness, then it’s probably a sound decision.

But when you’re tracking your properties closely and you’re getting agitated when they’re not giving you the same growth as others in your portfolio, you actually have to accept that cycles are different for different areas, different dwelling types, and it’s not necessarily a dud performer if it hasn’t done anything in a few years.

You really do have to look at its future long-term growth prospects, the growth that it might be giving you, and any maintenance issues that could become a lot more serious. They are things that can instigate a decision to sell.

Kevin: Would you bring someone in to help you make that decision, and if so, who would that person or those people be?

Cate: That’s a good question. Some people chat to their financial planners or their accountants. I certainly have people coming and chatting to me about their portfolio when they’re looking at rationalizing it – which one do they let go – or just getting a good understanding of which properties were good selections from the start.

A qualified property investment advisor could potentially help, and I think an accountant or a planner who is property-centric and interested and understands property is also a really good start.

Kevin: I think you make a very good point there, and that is that someone with a financial background who is actually an investor – because I’ve seen some pretty awful advice given by financial planners or financial experts who don’t understand property and don’t understand how a property can actually change from month to month or even year to year, Cate.

Cate: That’s right. They have to not carry any bias. They have to be able to look at it quite holistically and not have a preference for a particular side of town, for example, or the newness of an asset.

If you’re looking at an asset and judging it on the back of its potential tax benefits, I think that’s a disaster waiting to happen. I’ve seen some people sell really good properties and then buy young properties or brand-new properties in the quest to save some tax, and I think that’s not a good angle.

You have to look at their long-term growth drivers and the cost of holding it. Think about what your long-term plan is for that property and also how much time is it taking away from you if it’s a problematic property with either maintenance issues or a bad tenant?

So, there are quite a few questions to ask, and it’s not about tax benefits.

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RealEstateTalk.com.au is your trusted voice in property investment. Australia’s most respected real estate investing experts give tips on wealth creation. We will be discussing topics like property investment, property development (helping you understand the process), cash flow positive properties, negative gearing and finance (so you can borrow more from the banks), property investment in the latest hot spots as well as the USA, property tax (allowing you to structure for legal tax deductions and asset protection), negotiation, property management (assisting landlords and tenants understand their rights and responsibilities), negotiation and the psychology of property investment success.